GBP USD Forecast: Pound to Dollar Exchange Rate Predicted To Fall If QE Cut

Modified: Wednesday, 18 December 2013 21:39 BST - Written by John Cameron

STORY LINK GBP USD Forecast: Pound to Dollar Exchange Rate Predicted To Fall If QE Cut

The UK PLC’s austerity plan is working and needs to continue. That’s according to British Premier David Cameron, who commented on the state of the UK economy a short time ago in the light of domestic unemployment figures for the three months to September, published earlier. The key domestic jobs numbers revealed that the overall rate of unemployment had sunk to its lowest level since the first half of 2009 during the third quarter of this year. The pronounced drop-off in the rate of British joblessness from 7.6% during Q2 to 7.4% last quarter was largely unanticipated by analysts who were expecting the overall figure to remain static at 7.6%.

Opposition politicians in the UK have been quick to dismiss the numbers, pointing out that the proportion of workers who are now in part time employment has increased sharply since the credit crisis of 2007/08. However, currency market participants were more go-ahead in their assessment of the figures, sending the Pound higher against all of the other sixteen most-actively traded global currencies on the day.

The increased support for the Pound has sent the pound Australian Dollar exchange rate (GBP/AUD) up to a new multi-decade high of 1.8402 earlier on, while the Pound euro exchange rate (GBP/EUR) has improved to 1.1916 during the pre-trade in North America as a result. Sterling has also recorded healthy gains against the US Dollar on the session, sending the Pound Dollar exchange rate (GBP/USD) up to as high as 1.6380 earlier on.

At least some of this forward move for Sterling Dollar has been attributable to investors’ concerns regarding what this evening’s US Federal Reserve policy decision may bring. The consensus amongst analysts is that there will be no change to the Fed’s $85bn per month Quantitative Easing programme tonight. If this proves to be the case, then look for a sharp retracement for GBP USD before the year is out.

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